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Does Access to Formal Finance Matter for Welfare and Inequality? Micro Level Evidence from Nigeria

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  • Ralitza Dimova
  • Olabimtan Adebowale

Abstract

Using a treatment effects model, decomposition techniques and representative household data from Nigeria, we study the welfare and inequality implications of access to formal finance. While improving household welfare, formal access to finance increases inter-household inequalities, despite ameliorating the inequality enhancing effect of urban residence and enhancing the inequality ameliorating effect of greater educational attainment. The positive effect of access to formal finance on inequality is smaller than the effect of unobserved household characteristics, indicating that welfare and equality enhancing strategies should follow a holistic approach as opposed to one focusing on one isolated policy variable at a time.

Suggested Citation

  • Ralitza Dimova & Olabimtan Adebowale, 2018. "Does Access to Formal Finance Matter for Welfare and Inequality? Micro Level Evidence from Nigeria," Journal of Development Studies, Taylor & Francis Journals, vol. 54(9), pages 1534-1550, September.
    • Handle: RePEc:taf:jdevst:v:54:y:2018:i:9:p:1534-1550
    DOI: 10.1080/00220388.2017.1371293
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    Cited by:

    1. Gutiérrez-Romero, Roxana & Ahamed, Mostak, 2021. "COVID-19 response needs to broaden financial inclusion to curb the rise in poverty," World Development, Elsevier, vol. 138(C).
    2. Mahamat Ibrahim Ahmat Tidjani, 2020. "An exploratory analysis of financial inclusion in Chad," Post-Print hal-03322905, HAL.
    3. Md Jamil, Abd Rahim & Law, Siong Hook & Khair-Afham, M.S. & Trinugroho, Irwan, 2024. "Financial inclusion and income inequality in developing countries: The role of aging populations," Research in International Business and Finance, Elsevier, vol. 67(PA).
    4. Xuan T. T. Pham & Thu B. Luu, 2024. "Effect of FinCredit on income inequality: the moderating role of financial inclusion," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 953-969, April.
    5. Mostak Ahamed & Roxana Guti'errez-Romero, 2020. "COVID-19 response needs to broaden financial inclusion to curb the rise in poverty," Papers 2006.10706, arXiv.org.
    6. Hao, Yunping & Zhang, Bing, 2024. "The impact of digital financial usage on resident’s income inequality in China: An empirical analysis based on CHFS data," Journal of Asian Economics, Elsevier, vol. 91(C).
    7. Mallick, Debdulal & Zhang, Quanda, 2019. "The Effect of Financial Inclusion on Household Welfare in China," MPRA Paper 95786, University Library of Munich, Germany.
    8. Wanglin Ma & Peng Nie & Pei Zhang & Alan Renwick, 2020. "Impact of Internet use on economic well‐being of rural households: Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 503-523, May.
    9. Kung, Ming-Hsin & Chang, Chuang-Chang & Hsiao, Yu-Jen & Lo, Wen-Chi & Chang, Bi-Juan, 2024. "Banks can help? Evidence in the speed of lending for COVID-19 personal relief loans and financial inclusion," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    10. Akinwumi Sharimakin, 2023. "Microfinance bank in Nigeria: operating environment, sustainability, and welfare impact," SN Business & Economics, Springer, vol. 3(10), pages 1-27, October.
    11. Saifullahi Sani Ibrahim & Haruna Mohammad Aliero, 2020. "Testing the impact of financial inclusion on income convergence: Empirical evidence from Nigeria," African Development Review, African Development Bank, vol. 32(1), pages 42-54, March.
    12. Mohammed Seid Hussen & Mustafe Abdi Mohamed, 2023. "Impact of financial inclusion on household welfare in Ethiopia," Future Business Journal, Springer, vol. 9(1), pages 1-12, December.
    13. Martinson Ankrah Twumasi & Yuansheng Jiang & Zhao Ding & Pengcheng Wang & Wonder Abgenyo, 2022. "The Mediating Role of Access to Financial Services in the Effect of Financial Literacy on Household Income: The Case of Rural Ghana," SAGE Open, , vol. 12(1), pages 21582440221, February.

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